India's largest private housing finance company Monday announced a merger with its banking subsidiary, a move touted as the biggest corporate amalgamation in the country's history.
Housing Development Finance Corporation (HDFC) Limited, with an asset size of Rs 4.6 trillion, claimed "the proposed transaction shall enable HDFC Bank to build its housing loan portfolio and enhance its existing customer base".
HDFC Bank is also the largest private bank by market capitalisation, and the move comes at a time when India's government is contemplating the merger or sale of many state-owned banks to reduce their numbers, given the fact that several of them are saddled with mountains of bad loans.
Deepak Parekh, chairman of HDFC Limited, described the move as "a merger of equals".
"We believe that the housing finance business is poised to grow in leaps and bounds due to the implementation of RERA (Real Estate Regulatory Authority), infrastructure status to the housing sector, government initiatives like affordable housing for all, amongst others," he said in a statement to the media.
"Over the last few years, various regulations for banks and NBFCs (non-banking financial corporations) have been harmonised, thereby enabling the potential merger.
"Further, the resulting larger balance sheet would allow underwriting of large ticket infrastructure loans, accelerate the pace of credit growth in the economy, boost affordable housing and increase the quantum of credit to the priority sector, including credit to the agriculture sector."
The completion of the merger is expected to be over by December 2024.
